Election campaign must focus on rebuilding our living standards

Much as the Albanese government’s fourth budget will be dominated by election sensitivities, it needs to be much more than a populist vote-buying exercise framed around cost-of-living relief.

Likewise Peter Dutton’s budget-in-reply speech two days later.

For the sake of medium- to longer-term living standards and national security, both leaders must set the scene for a transformation of policies away from short-termism to grapple with fiscal and economic reforms to address the nation’s serious challenges.

What Labor wants and the nation needs from the March 25 budget are two markedly different approaches. It is already clear, unfortunately, that Jim Chalmers will avoid spending restraint in the budget to fund costly election promises. A one-off hit from Cyclone Alfred also will be a factor.

The Treasurer needs to look to the longer term, however, as does the Coalition.

The emergency signals are flashing, as The Australian’s editor at large Paul Kelly wrote on Saturday: “the eruption of Donald Trump, the Chinese flotilla circumnavigating the continent, a predicted decade of budget deficits, devastating misjudgment of spending priorities, moribund productivity and the exhaustion of economic reform”.

Elections can result in redirection and renewal, and the budget is an opportunity for a curtain-raiser.

Increasing defence spending needs to be a centrepiece of the forward estimates. This is inescapable, not only because the Trump administration is urging it on Australia but also because of our deteriorating strategic situation.

Former Defence Department head Dennis Richardson and former defence force chief Sir Angus Houston made the point at a US Studies Centre conference in November 2024. That imperative, which should not be allowed to worsen Australia’s fiscal predicament by loading it primarily on to the national credit card, will necessitate an overhaul of spending priorities away from short-term cost-of-living sweeteners and the care economy.

Nobody can pretend that will be easy, given our ageing population creating greater demands on the health system, the cost of the National Disability Insurance Scheme, and community expectations of heavily subsidised childcare and much else.

Both sides need to acknowledge that maintaining current levels of social support will depend on economic growth, revenue from the productive economy, especially the resources sector, and curtailing government spending, which under Labor and Chalmers will reach an exceptional high of 27.2 per cent of GDP in 2025-26 compared with 24.4 per cent of GDP in 2022-23 after the pandemic.

As economist Chris Richardson told Kelly: “Since coming to office Labor has taken decisions to increase spending by $124bn and to raise taxes by $46bn … That explains how you can have a budget that moved into surplus and yet a budget whose fundamentals are worsening at the same time. The permanent promises will go on but the temporary luck will fall away.”

Despite the Opposition Leader’s hard-man image, the Coalition has not come close to grappling with the main challenges any more than Labor. After Anthony Albanese’s eye-watering $8.5bn Medicare promise to provide bulk billing for 90 per cent of GP visits by 2030 (regardless of patients’ ability to pay), Mr Dutton rushed in to follow suit and with an additional $500m for bulk-billed mental health appointments. In stringent times a more rational policy, with a sensible measure of user pays, is essential.

The Coalition is ahead of Labor on the two-party-preferred vote but the latest Newspoll, released on Monday, shows the Coalition has not convinced most Australians it is ready to govern: 55 per cent of voters polled said they were not confident it was, compared with only 45 per cent who said it was.

The Western Australia election result, which shows Labor remains competitive in the state, suggests the federal election will be tight.

While Labor Premier Roger Cook was expected to win easily on the back of predecessor Mark McGowan’s 2021 landslide, the breakdown of the vote on Saturday holds lessons for both major parties. Governing from the sensible centre and supporting important developments such as Woodside’s extension of its North West Shelf gas project helped Mr Cook hold on to mainstream support.

The federal Coalition backs the Woodside project but, regrettably, Environment Minister Tanya Plibersek has delayed a decision.

In one of the first instances of a teal-inspired community independent ousting a Labor MP, the state government’s likely loss of Fremantle MP and frontbencher Simone McGurk to Kate Hulett in a “safe” WA Labor seat will spook the major parties. Likewise the Liberals’ failure to regain former blue-ribbon seats in Perth. That will comfort teal MPs in former Liberal strongholds in Sydney and Melbourne, and Greens MPs in prosperous Brisbane seats. But when living standards are seriously at risk, reform should be the main campaign narrative.

The main parties need to hold their nerve against the whims of green-tinged independents and prioritise energy security.

If the election is to usher in a new era of reform to build prosperity, the budget and reply should set the scene for the campaign Australia needs.